Do You Arbitrate or Litigate?

Contractors and their lawyers understand arbitration is often the preferred method for the resolution of a construction dispute. It is a standard clause in most construction contracts.

But what happens if an agreement is not very clear and the parties are uncertain if their disagreement is to be presented to an arbitration panel or to a court. Who gets to make the decision as to where the dispute is heard?

A recent case provided an interesting answer. The supplier of impact resistant doors and the general contractor on a hi-rise project had a difference of opinion over timely delivery of ordered product. Since it wasn’t clear if they had agreed to arbitrate or litigate their disputes, they filed suit, asking the court for guidance. A judge found the parties had sufficiently evidenced their intent to have arbitrators, not a court, hear and decide their disagreements. How? He discovered they had incorporated a reference to the Construction Industry Rules of the American Arbitration Association within their contract.

So be careful – even just referring to arbitration rules can sway a court in the direction of having a dispute arbitrated versus litigated. Better to state clearly which option you prefer. This way, you, and not a third-party, get to make this all important decision.